FG plans new borrowing to finance 2022 budget deficit
President Muhammadu Buhari has announced that the deficit of the 2022 budget which amounts to N6.26 trillion will be financed through new borrowings, incomes from the sale of government assets, and drawdown on loans.
“We plan to finance the deficit mainly by new borrowings totalling N5.01 trillion, N90.73 billion from Privatization Proceeds and N1.16 trillion drawdowns on loans secured for specific development projects,” the President stated as he presented the N16.39 trillion, 2022 budget termed ‘budget of economic growth and sustainability to the members of the National Assembly on Thursday.
The president, while noting that the deficit which represents 3.39 percent of estimated GDP, is slightly above the 3 percent threshold set by the Fiscal Responsibility Act 2007.
But he quickly tried to douse wide concerns on the government’s continued resort to borrowing to finance our fiscal gaps.
“They are right to be concerned,” Buhari stated.
“However, we believe that the debt level of the Federal Government is still within sustainable limits. Borrowings are to specific strategic projects and can be verified publicly,” he said.
According to him, “There was a need to exceed this threshold considering the nation’s desire to continue tackling the existential security challenges facing our country.”
Highlights of the budget include total federally distributable revenue estimated at N12.72 trillion while total revenue available to fund the 2022 Federal Budget is estimated at N10.13 trillion.
This includes Grants and Aid of N63.38 billion, as well as the revenues of 63 Government-Owned Enterprises.
Oil revenue is projected at N3.16 trillion, Non-oil taxes are estimated at N2.13 trillion and FGN Independent revenues are projected to be N1.82 trillion.
Similarly, the oil benchmark for the 2022 appropriation has been put at $57 per barrel, while the exchange rate is N410.5 per dollar, GDP growth of 4.2 percent was projected while the inflation rate is put at 13 percent.
Also, oil production was estimated at 1.88m barrels per day including condensates.
The proposed expenditure comprises Statutory Transfers of N768.28 billion; Non-debt Recurrent Costs of 6.83 trillion; Personnel Costs of N4.11 trillion; Pensions, Gratuities, and Retirees’ Benefits N577.0 billion.
Others include; Overheads of N792.39 billion; Capital Expenditure of N5.35 trillion, including the capital component of Statutory Transfers; Debt Service of N3.61 trillion; and a Sinking Fund of N292.71 billion to retire certain maturing bonds.
Speaking further, President Buhari hinted that strategies to improve revenue mobilisation in 2022 will include; ensuring enhanced tax and excise revenues through policy reforms and tax administration measures; review of policy effectiveness of tax waivers and concessions.
Other strategies according to him include boosting customs revenue through the e-Customs and Single Window initiatives; and safeguard revenues from the oil and gas sector.